Nepal Rastra Bank Prohibits Banks from Removing Employees During Branch Consolidation

Nepal Rastra Bank (NRB) has prohibited banks and financial institutions from dismissing employees on the grounds of branch consolidation or merger, while introducing new provisions to facilitate branch adjustments in urban areas and expand banking access in underserved rural communities.

The central bank has amended its Unified Directives, setting conditions for Class ‘A’, ‘B’ and ‘C’ banks and financial institutions to consolidate branches while protecting employees, customers and access to financial services.

Under the revised provisions, banks and financial institutions that close four branches within metropolitan cities, sub-metropolitan cities or municipalities must establish at least one new branch in a rural ward where banking services are not yet available.

The provision aims to reduce overlapping branches in urban areas while expanding banking services to underserved communities. It also seeks to ensure that branch consolidation does not undermine financial inclusion in areas with limited access to formal banking services.

Similarly, when consolidating branches operating within one kilometre of each other in sub-metropolitan cities and municipalities, at least one branch must remain operational. Other branches within the specified distance may be consolidated subject to the prescribed conditions.

However, branches operating in rural areas cannot be closed, relocated or merged with other branches without prior approval from NRB. The requirement is intended to prevent banks from withdrawing services from communities that depend on physical branches for basic banking transactions.

NRB has explicitly directed banks and financial institutions not to terminate employees working at branches that are closed, merged, or consolidated.

Employees affected by branch adjustments must be transferred to a nearby branch. If they are transferred to another branch, their preferences and consent must be considered, according to the revised directive.

The provision seeks to protect employees from losing their jobs as financial institutions restructure their branch networks to improve operational efficiency and manage costs.

Banks and financial institutions must publish a public notice at least 90 days before consolidating a branch to inform customers and other stakeholders.

The notice must be published in a national-level daily newspaper, on the concerned institution’s website, and on the notice board of the branch being consolidated.

The advance notice is intended to give customers sufficient time to make alternative arrangements for deposits, withdrawals, loan repayments and other banking services before a branch closes or merges with another location.

NRB has also introduced provisions to protect customers affected by branch consolidation.

Customers of a branch being consolidated must be allowed to repay their loans or discontinue other services without paying any additional fees for doing so.

The provision is expected to ease the financial burden on customers who may wish to settle outstanding loans, close accounts or discontinue banking services following changes to their branch’s operations.

Banks and financial institutions must also ensure that branch consolidation does not adversely affect financial access in the concerned area.

If a branch has been established specifically to serve a government agency or public institution, the bank or financial institution must obtain the concerned institution’s written consent before consolidating it.

The revised provisions also require banks to ensure that branch adjustments do not negatively affect access to financial services in the area.

Following the completion of a branch consolidation, the concerned institution must update the information on NRB’s reporting portal within three working days. It must also submit the prescribed details to the Bank and Financial Institution Regulation Department and the relevant supervision department.

The revised provisions come as growing digital banking and electronic payment transactions prompt financial institutions to reassess the need for physical branches, particularly in urban areas where multiple branches operate in proximity.

Consolidating overlapping branches can help banks reduce operating costs and use their resources more efficiently. However, physical branches remain important in rural communities where access to digital services, reliable internet connectivity, and other banking facilities may be limited.

By linking urban branch closures with rural expansion and introducing safeguards for employees and customers, NRB aims to make branch network management more flexible without compromising financial inclusion.

The effectiveness of the revised framework will depend on how banks implement the new requirements, protect existing banking access, and establish new branches in underserved rural areas.